Utility flaws thrust PSC into election spotlight

Regulator becomes center of attention in gubernatorial contest

For months, power outages and long waits for telephone service repair have generated headlines, with the Maryland Public Service Commission's work as the back story.

Now the PSC, which regulates utilities within the state, has moved front and center, via a series of attack ads traded by Gov. Martin O'Malley (D) and his challenger, former Gov. Robert L. Ehrlich Jr.

Each blames the other for big rate increases by Baltimore Gas and Electric Co. The charges flew again Thursday at the second debate between the gubernatorial candidates. A continuing point of contention has been the performance of the PSC under each governor.

Ehrlich's ad accused O'Malley  and by implication the PSC, whose five members the governor appoints  of not doing enough to stop rate hikes, and O'Malley's ad points to e-mails between Ehrlich's PSC chairman and a utility lobbyist as evidence of a too-cozy relationship with electric companies.

The fact that the PSC is the subject of talking points in the campaign shows how politically charged the commission's work has become in recent years.

In an effort to make sure ratepayers don't lose when the commission makes a judgment call, Del. Brian J. Feldman (D-Dist. 15) of Potomac is planning to offer legislation that would require the PSC to establish reliability standards by 2012. The measure, drafted with help from Montgomery County Councilman Roger Berliner (D-Dist. 1) of Potomac, would reduce utilities' profits incrementally for failing to meet those standards.

"I don't think anybody is happy, including myself, with what they [the PSC] are coming up with," said Sen. David R. Brinkley (R-Dist. 4) of New Market, noting that rates have gone up and service is worse.

Even as politicians are pressing the PSC to take a harder line with utilities, some consumer and small business advocates say the commission has been too reluctant to hold the companies it regulates accountable and to set, and insist that they meet, performance standards.

The PSC's approach is still "very hands-off," said Maryland Public Interest Group executive director Johanna Neumann. "Offering lousy service is certainly not in the public interest. In my opinion, they are still too responsive and reactive when they should be setting the agenda."

PSC chairman Douglas R.M. Nazarian declined to comment. The other four PSC members had not returned phone calls seeking comment by deadline Thursday.

However, Marceline White, executive director of the Maryland Consumer Rights Coalition, said she sees major improvement.

She called a "game changer" the PSC's decision to let electric companies, including Baltimore Gas and Electric Co., Pepco and Delmarva Power, proceed with smart meters only under terms meant to protect consumers.

"It's really the first time in the country that a regulator said the consumer is not going to assume the cost or take the risk in installing meters," White said.

"Obviously, we'd like to see them be proactive instead of reactive, [but] I want to applaud the change. There has to be a shift back to where the burden is on the industry, not the consumer."

Small business owners see themselves as consumers as well, said Ellen Valentino, Maryland director of the National Federation of Independent Businesses.

"In the case of long outages, it affects their ability to open their doors," she said.

Rate increases and the fact that small businesses in part subsidize, through a universal service fee, other electric customers have made it especially tough for small businesses already burdened by a bad economy, higher insurance and worker's compensation costs.

"Has there been proper oversight of utility companies? The PSC ought to start looking for some more accountability," Valentino said.

That includes more accountability from Verizon, said Progressive Maryland Executive Director Rion Dennis.

Progressive Maryland has lobbied for consumer protections, criticizing Verizon for its long history of failing to meet state standards requiring the company to restore land-line phone service to customers within hours, not days, as attested in hundreds of customer complaints against Verizon filed with the PSC.

In August 2007, the PSC opened an investigation into Verizon's poor service record. Three years later, the company and PSC have moved toward, but have not finalized, an agreement that would settle the case.

"A lot of the shortcomings of the PSC have had to do with the legal framework passed in the General Assembly which has been pro-business rather than pro-consumer," Dennis said, commenting that state statutes are "very vague."

"I don't think it's really the regulators' fault  it's more how business lawyers and lobbyists can manipulate the system," he said.

MaryPIRG's Neumann said she is not sure that legislation requiring a performance standard for utilities is the right approach, but that regulators "need to step up to the plate."

As an example, she said Pepco needs to take responsibility for its heavily criticized performance.

In an Aug. 27 letter to the PSC, O'Malley said "Pepco's performance is far from acceptable," and he supports standards to make sure utility records on maintaining and restoring power are closely monitored.

O'Malley told the commission it should establish consequences for poor performance, including poor communication by utilities with their customers. And he urged them to implement standards and accountability as soon as possible.

Asked whether he supports legislation that would set performance standards and penalties for failing to meet them, O'Malley said he is willing to consider means to improve performance as long as they work.

The Public Service Commission requires utilities to submit reports every year that include averages of how often customers lose power and how long outages last.

A Gazette analysis of those reports showed that Pepco's Maryland customers have experienced many more outages in the past two years than have nearby BGE and Allegheny Power customers.

A key reliability measurement, the System Average Interruption Frequency Index, was about 61 percent higher for Pepco than for BGE and more than 100 percent higher than for Allegheny in 2009.

Pepco's reliability indices have worsened since the General Assembly voted to deregulate electricity supply in 1999, which led Pepco to sell its power plants and become an electricity distributor only.

Asked why the PSC did not act earlier to require Pepco to improve its reliability, O'Malley said awareness became "much more acute given the intensity and frequency of weather events."

"We have a much more professional Public Service Commission than we had in the previous administration," O'Malley said, referring to the term of his predecessor and opponent, Ehrlich, who lost his re-election bid to O'Malley in 2006.

He added that "most, if not all," of the major provisions of Feldman's draft bill are actions the PSC already has the authority to take.

And if O'Malley's PSC is more professional, as the governor states, his administration would have taken those measures, Fawell said.

"Bob Ehrlich will appoint a PSC that will take advantage of the authority that it has, rather than wait for legislation that is not needed in the first place," he said.

Asked whether Ehrlich would appoint a more aggressive commission, Fawell said the administration's goal would be to ensure that customers get the best possible service. Ehrlich's previous PSC chairman, Kenneth Schisler, who was accused of being too close to utility interests, resigned in 2007. Schisler didn't return a call for comment.

Pepco management said in a statement that it is the company's mission to "continue to work with state and local regulators to provide reliable electric energy to our customers." Just recently, the statement said, the utility filed with the PSC its plan to improve reliability.

BGE declined to comment, and Verizon did not respond to a request for comment made last month.